3 reasons why collaboration between fintech firms and banks makes sense

There may not be much merit in pitting one against the other, reports Tech in Asia

The battle between banking behemoths and new-age fintech firms may seem like the classic David versus Goliath. But dig a little deeper and there may not be much merit in pitting one against the other.

While some collaborations are already underway, others are likely to take the following routes.

Accelerators

Banks can act as incubators or accelerators for fintech start-ups. Banks like Barclays, HSBC, and Royal Bank of Scotland are part of Innovate Finance that promotes global fintech firms in the UK. Back home, most banks are supporting fintech firms through various accelerators. 

Acquisitions

Banks could acquire youngish fintech firms to plug their own gaps or provide a wider set of services to their customers.

This could be better compared to setting up units that require them to go through significant re-engineering. A new product, a more agile tech team, and customer integration—all of these could be tough to weave into a bank’s fabric. It is not surprising, therefore, that a recent study reported that 60 per cent of banks worldwide would collaborate with a fintech firm, while 25 per cent would consider acquiring one.

Areas of expertise

Lastly, fintech start-ups could take care of several non-core businesses or processes for banks, allowing them to remain focused on their areas of expertise even while unlocking new ways to add value to their offerings. A few fintech companies have ensured that they ace in areas like P2P lending, payments, financial marketplaces, online investment, and trading advice. A good example is JP Morgan Chase & Co using On Deck Capital to develop a new online loan for small businesses. This is an excerpt from an article published on TechInAsia. You can read the full story here